In Lesson 18 Glossary Take the test Top things to know So, what's your tax bracket? How much you should withhold What's FICA again? Who needs to pay estimated taxes A word about penalty and interest charges 1040 mysteries revealed Alternative minimum tax: What you should know The dreaded audit: What are the chances? The best time for tax planning

Money 101 Lessons Setting priorities Making a budget Basics of banking and saving Basics of investing Investing in stocks Investing in mutual funds Investing in bonds Buying a home Controlling debt Employee stock options Saving for college Kids and money Planning for retirement Asset allocation Hiring financial help Health insurance Buying a car Taxes Home insurance Life insurance Estate planning Auto insurance 401(k)s

Under the Federal Insurance Contributions Act (FICA), 12.4 percent of your earned income up to an annual limit must be paid into Social Security, and an additional 2.9 percent must be paid into Medicare.

For 2006, that limit is $94,200.

There are no earned income limits on Medicare taxes -- so even if your salary is well above the cap for Social Security tax, you will still owe Medicare tax on your total earned income.

If you're a wage or salaried employee, you pay only half the FICA bill (6.2 percent for Social Security + 1.45 percent for Medicare), and the tax is automatically withheld.

Your employer contributes the other half.

For most people that means 7.65 percent of their paycheck is withheld and their company pays another 7.65 percent on their behalf.

If you're self-employed, however, you're expected to cough up both the employee and the employer share of FICA. You are, however, permitted to deduct half of this self-employment tax as a business expense.